BOJ Rate Hike Causes Yen Swings Amid Global Market Volatility

The Bank of Japan raised its interest rate by 25 basis points to 1.25%, in line with market expectations, but the decision was not unanimous. Board members Toichiro Asada and Ayano Sato voted against the increase, while Governor Kazuo Ueda offered mixed guidance on future rate hikes.

The yen initially weakened after the announcement, with USD/JPY rising above 158 from around 156, as traders were disappointed by the lack of clearer guidance on further rate hikes. However, the currency reversed sharply lower overnight Friday after reports emerged that the Bank of Japan had conducted rate checks, often seen as a precursor to intervention.

NZD/AUD fell to fresh cycle lows during Friday's local session and dipped below 0.8020 offshore, following comments from RBA Governor Bullock, who noted that upside inflation risks appeared to be materialising and the RBA would need to consider whether previous rate increases had been sufficient.